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Chicago Bridge & Iron (CBI) Announces Preliminary Q1 Earnings

Zacks

Chicago Bridge & Iron Company CBI released preliminary financial results for first-quarter 2018. The company’s final results will be reported on Apr 23.

The company projects revenues in the range of $1.7-$1.8 billion. The Zacks Consensus Estimate for the metric is pegged lower at $1,652 million.The top-line rise reflects exceptional operating performance across the company's portfolio of projects, particularly the Cameron and Freeport LNG projects. The Calpine combined-cycle natural gas power project has witnessed excellent execution as well.

Income from operations is expected between $100 million to $110 million, with EBITDA in the range of $118-$128 million.

The company projects net income of $37 million to $43 million, with earnings per share coming between 37 cents to 43 cents. Earnings are anticipated to be hurt by higher interest charges (about $20-$22 million) in the quarter. Restructuring charges are expected in the band of $4-$6 million, or 3-5 cents. The Zacks Consensus Estimate for the bottom line (adjusted for non-recurring items) is projected at 45 cents.


The company boasts a strong prospect list for potential new awards this year. A high level of bid activity coupled with positive customer investment decisions on a number of very large projects in LNG, petrochemical and other markets ought to drive Chicago Bridge & Iron’s results in the upcoming quarters.

For first quarter 2018, the company expects new awards of $1.1-$1.2 billion, while backlog is anticipated in the range of $10.5-10.6 billion.

This Zacks Rank #3 (Hold) company’s shares have lost 48.5% in the past year, in stark contrast with the industry’s rise of 1.3%. The company has missed the Zacks Consensus Estimate for earnings by an average of 139.2% over the trailing four quarters and also lagged revenue estimates. The company has been plagued by formidable headwinds since the crash in oil prices and has taken aggressive measures to shore up its finances.

In December 2017, Chicago Bridge & Iron and McDermott MDR agreed to merge in an all-stock deal worth about $6 billion. This created an extensive engineering, procurement, construction and installation company amid a stabilizing global oil market, with $10 billion in combined revenues and an impressive backlog of $14.5 billion.

The deal is expected to be cash-accretive (excluding one-time costs) within the first year after conclusion. The companies expect to generate annualized cost synergies of $250 million in 2019 and sizeable revenue synergies. This is in addition to Chicago Bridge & Iron’s $100-million cost-reduction program.

The combined company will be completely vertically integrated and offer end-to-end engineering, procurement, construction and installation (EPCI) services to the onshore and offshore energy sectors.

McDermott primarily focuses on offshore operations, while Chicago Bridge & Iron's strength is in onshore projects. The deal will integrate two highly complementary businesses and create a leading onshore-offshore EPCI company, with immense scale and diversity to capitalize on global opportunities. Whether the combined entity manages to thrive in this challenging energy infrastructure market remains to be seen.

The deal is on track to be concluded in the second quarter of 2018.

Stocks to Consider

Some better-ranked companies working in the same space as Chicago Bridge & Iron are EMCOR Group, Inc. EME, sporting a Zacks Rank #1 (Strong Buy) and Primoris Services Corporation PRIM, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EMCOR Group has a strong earnings beat history, having surpassed estimates thrice over the trailing four quarters. It has a positive average surprise of 28.1%.

With three back-to-back earnings beats, Primoris Services has an average positive surprise of 10.7%.

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